Alphabet reports Q2 2026 earnings on July 22. Most investors going into the print are focused on Search growth and whether Cloud can sustain its acceleration.

But Bank of America’s latest note highlights something that could make the headline numbers look unusual: an estimated $80 billion boost to Q2 operating income that has almost nothing to do with Alphabet’s core business.

The bank reiterated its buy rating and $430 price objective on Alphabet and raised its Q2 EPS estimate to $8.38, well above the Street consensus of $2.90. The gap comes down to one line item: how Alphabet accounts for the jump in value of its stake in Anthropic.

Why the Anthropic stake revaluation is changing Alphabet’s Q2 numbers

Alphabet holds roughly 14% of Anthropic, a stake worth approximately $135 billion at Anthropic’s latest valuation of $965 billion, the Motley Fool reported. At the end of Q1, Anthropic was marked at $380 billion.

By Q2, that valuation had risen to $965 billion, following a $65 billion fundraising round. Bank of America estimates Alphabet’s 14% stake generated roughly $80 billion in unrealized gains, which flows through the company’s operating income for the quarter.

More Google:

• Alphabet stock rally exposes Google’s unusual AI problem
• Google just took crown Verizon held for 22 years
• Google CEO says AI has changed revenue picture completely

This pattern already showed up in Q1. Alphabet’s net income hit a record $62.6 billion in Q1 2026, but nearly half of that profit came from Alphabet marking up the value of its equity stakes in Anthropic and SpaceX, rather than its ad and cloud businesses, Fortune reported.

The Q2 version of that effect is significantly larger because Anthropic’s valuation nearly tripled between the two quarters.

Most analysts following Alphabet haven’t fully baked the Anthropic gain into their Q2 models, which explains why BofA’s EPS estimate of $8.38 sits so far above the Street consensus of $2.90. Investors will need to strip out that line item to get a clean read on how the underlying business actually performed.

What Bank of America expects from Google Cloud in Q2 2026

Beneath the Anthropic accounting story, Cloud is the number Bank of America is most focused on. The bank raised its Cloud growth estimate to 70% for Q2, up from the 63% Alphabet delivered in Q1, citing strong enterprise demand indicators and backlog data that point to at least $230 billion in committed revenue over the next eight quarters.

After Q1, Alphabet’s Cloud backlog stood at $462 billion, nearly double what it had been the quarter before, as TheStreet reported. Cloud revenue came in at $20 billion in Q1, up 63% year over year, with operating income tripling to $6.6 billion, CNBC reported.

CEO Sundar Pichai said on the earnings call that enterprise AI solutions had become the primary growth driver for Cloud for the first time in the company’s history.

Bank of America models Cloud segment operating margin approaching the mid-30% range for Q2 as capacity and pricing scale together. That would be a further step up from Q1’s 32.9%, which itself had more than tripled from a year earlier.

Beata/Getty Images

Search, full-year estimates, and Alphabet’s Q2 revenue outlook

Bank of America expects Search to grow 17% in Q2, a touch above where the Street sits. Currency effects trimmed the estimate slightly from where the bank had it before, but retail search demand heading into the quarter looked strong.

The bank did flag some softness in CPG and travel verticals. Google’s overall search market share and traffic held steady through June, despite the growing use of AI chat alternatives, as TheStreet reported.

Total Q2 revenue is estimated at $102.1 billion, slightly above the Street’s $101.0 billion. For the full year 2026, Bank of America raised its net revenue estimate by 1% to $427 billion and its EPS estimate by 36% to $19.70, projecting 16% full-year Search growth and 72% Cloud growth.

For 2027, the bank models $537 billion in revenue and $14.70 in EPS. The $430 price objective is based on 28 times the bank’s 2027 EPS estimate.

What investors should watch on the July 22 earnings call

The most important numbers on the call won’t just be Q2 results. Bank of America expects Q3 guidance of $108.8 billion in revenue and $3.03 in EPS, roughly in line with the Street at $107.9 billion and $3.02. What management says about the trajectory of Cloud margins and AI demand into the second half will carry more weight than any single quarterly beat.

Capital expenditure guidance is also worth watching. Given accelerating AI demand, higher memory and component costs, and Alphabet’s recent capital raise, Bank of America thinks the company could lift its 2026 capex range by around 5%, to $190 to $200 billion.

The bank’s own estimate sits at $196 billion. Catalysts the team cited going forward include new AI-powered Search ad formats, the rollout of agentic search features announced at Google I/O, a fall launch of Gemini 4, and potential updates on monetizing Alphabet’s custom TPU silicon externally.

The bank also flagged risks. Tougher year-over-year comparisons in Q3, OpenAI’s growing push into advertising, and capital rotation toward AI-related IPOs could each create headwinds for the stock even if fundamentals hold.

At current valuations, Alphabet is pricing in significant continued execution. Bank of America thinks it can deliver. But July 22 is when the quarter’s data actually lands.

Related: Google CEO says AI has changed revenue picture completely